Excess oil prompts Opec meeting

Opec will meet in Qatar on October 19 to work out the details of a one million barrels per day cut in oil supplies and put a floor under prices, an Opec official said today.

The gathering is likely to be far from straightforward even though all 11 members are united on the need to remove excess oil from world markets.

Iran and Venezuela, struggling to pump enough to meet their Opec production quotas, do not want to cede market share to those -- such as top exporter Saudi Arabia and Algeria -- pumping beyond formal Opec limits, delegates have said.

Oil prices have dropped by 20 per cent since July to below US$60 per barrel and the exporter group must act now to stem a "catastrophic" price slide, Edmund Daukoru of Nigeria told Reuters by telephone from the Niger Delta earlier on Saturday.

He said there was broad agreement the cut should be made from the average actual output level over the past 12 months, which is close to Opec's existing production ceiling of 28 million bpd.

During that time, most member producers have been pumping at -- if not well beyond -- their individual Opec quotas. But Indonesia and Venezuela have fallen well below theirs and Iran has had difficulty matching its limit.

"There is general agreement on the equity of using the average actual production over the past year ... It shows more equity to those who have put on more capacity over this period. It does not penalise them as much as it would have if we had used 28," Daukoru said.

"We will take one thing at a time and stabilise the market first. We are just taking practical measures. None of what we are doing is to make a permanent arrangement. What we are doing is just reacting to what is happening in the market."

"The time to do something is...now because we don't know where the floor of this drop will end. It would be foolish to wait till it gets to US$10 before we do anything because that would really kill the capacity initiatives," he said.

Some members of the group, such as the world's top oil exporter Saudi Arabia, have pumped far above their quotas this year to feed a surge in oil demand from Asia. Others, such as Venezuela and Indonesia, have been unable to meet their quotas due to capacity decline.

A cut from quotas would have spared Venezuela, Indonesia and -- to a certain extent -- Iran, from making a cut in actual supply.

Overall, the difference between average actual production by the 10 members with quotas and the existing ceiling was only about 50,000 bpd, Daukoru said.

Using actual production as a reference would mean that all members, excluding Iraq which has no quota, would be cutting output to stem sliding prices, Daukoru said. But he stressed that the group would not be setting new quotas.

"If we start debating quotas now, we will not be able to respond fast enough. If we start debating quotas now with prices the way they are, it would be foolish."

Analysts said Opec would probably resolve the issue by publishing a table itemising the volume to be cut by each of the 10 members, totalling 1 million bpd, but avoid specifying the new production limit for each country.

- REUTERS